The 3 Biggest Challenges to Practicing Law While Running a Law Firm

The 3 Biggest Challenges to Practicing Law While Running a Law Firm

In this blog, we feature insights into the three biggest challenges running a law firm while also acting as trial lawyer for your firm.

Practicing law, while simultaneously running a successful law firm is not easy – in fact, it can be quite stressful, particularly in today’s competitive landscape.

Lawyers traditionally struggle with balancing their client work and the pressure of building a financially sound business. It is increasingly important for lawyers to understand how the right financing solutions can help alleviate the pains of scaling a business. Many law firm owners rely on self-financing or turn to traditional banks for case expenses. However, both options have many business risks and often don’t address their most salient challenges.

The main pain points of running a law practice as a business are:

  1. Case Costs & Uncertainty. Contingency fee lawyers often take on expensive, time-consuming cases, unsure when a settlement or verdict will be reached. During this time of uncertainty, the firm foots the bill for case-related expenses and it may take years for the firm to be reimbursed. This uncertainty multiplied over hundreds or thousands of cases.
  2. Cash Flow Management. While every law firm owner understands that to grow their business they need to fund it, many underestimate the importance of cash flow management. Most owners fund case costs from the firm’s cash flow. However, when the firm’s cash is tied-up in litigation costs you forgo the opportunity to have that money work for the firm through marketing to bring in new cases, hiring top talent, hiring support staff, investing in IT systems to optimize efficiency, and many other investments with better ROI than case expenses. Self-financing case costs results in non-deductible, interest-free loans to the firm’s clients with after-tax dollars. This is an inefficient and unproductive way to manage cash flow that hampers the firm’s ability to scale growth.
  3. Lack of Knowledge of Alternative Funding Options. Although many law firm owners know that there is financing available, many don’t understand the differences between financing with a traditional bank, a litigation funding company, or a specialty bank like Esquire Bank. Not all financial partners are made equal. Traditional banks do not have the expertise to value a firm’s case inventory nor the ability to lend against it. Litigation funding companies cannot offer the competitive rates that a bank can and often have onerous covenants and fees. Although most firms usually recoup the cost of financing from the settlement, effectively making the loan ‘interest-free’ over the life of the case, as ethical stewards of their clients, law firms should find the best ‘deal’ or lowest interest for their clients.

To overcome these challenges of running a law firm, it’s crucial that law firm owners partner with a strategic financial partner that intimately understands the contingency fee business model and can value the firm’s case inventory, and have the ability to use it as collateral to lend against it. Most importantly, owners should partner with an institution that is willing to customize financial solutions to the individual needs of the firm. This ensures that both parties are always working towards delivering on the growth vision and goals of the law firm. A true business partnership that is long-term and win-win for both.

Meet with Esquire Bank

Learn how your law firm can finance case costs and free up capital to invest in firm operations and growth. Schedule a no-obligation consultation with an Esquire Bank Business Development Officer today at a time convenient to your schedule.


For more on Esquire Bank’s expertise in providing tailored solutions for law firms, please visit Esquire Bank’s resources portal, Lawyer IQ, where you can learn about growing your businessfinancing for law firmsmarketing strategy best practices, and more.

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* The information provided on (or accessed through) this blog is provided for general informational purposes only and is not intended as, and should not be relied on for, law firm operations, tax, legal or accounting advice. Some of the information may not be applicable or appropriate for all law firms. Please consult your own tax, legal and accounting advisors as appropriate.

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